Acct midterm

Ch. 4 If the financial statements cannot be relied upon because they contain one or more material departures from GAAP, which type of audit opinion will be issued by the auditor? Qualified opinion Disclaimer Adverse opinion Unqualified opinion

Adverse opinion

Ch. 4 Which of the following is not a primary role of an independent auditor? Assume legal and professional responsibilities to the public Advise client on tax strategies Determine whether a company's financial statements are materially correct All of these answer choices are correct

Advise client on tax strategies

Ch. 3 Product costs are matched against sales revenue: in the period immediately following the purchase. in the period immediately following the sale. when the merchandise is purchased. when the merchandise is sold.

when the merchandise is sold.

Ch. 3 Gomez Company had beginning inventory of $1,700 and ending inventory of $1,300. The cost of goods sold was $4,100. Based on this information, what is the amount of inventory that was purchased by Gomez Company? $7,100 $5,400 $4,100 $3,700

$3,700

Ch. 5 How would accountants estimate the amount of a company's uncollectible accounts expense? Consider new circumstances that are anticipated to be experienced in the future. Compute as a percentage of credit sales. Consult with trade association and business associates. All of these answer choices are correct.

All of these answer choices are correct.

Ch. 2 How will accounts receivable appear on the following financial statements? Asset on the balance sheet Expense on the income statement Liability on the balance sheet Revenue on the income statement

Asset on the balance sheet

Ch. 2 How will accounts payable appear on the following financial statements? Expense on the income statement Revenue on the income statement Liability on the balance sheet Asset on the balance sheet

Liability on the balance sheet

Where would the following be placed on the balance sheet? Computers operating expenses rent revenue building cash notes payable land utilities payable utilities expense trucks gasoline expense retained earnings supplies accounts payable office furniture salaries expense common stock service revenue interest expense dividends supplies expense

Computers: Asset operating expenses: SE rent revenue: SE building: Asset cash: Asset notes payable: L land: Asset utilities payable: L utilities expense: SE trucks gasoline expense: SE retained earnings: SE supplies: Asset accounts payable: L office furniture: Asset salaries expense: SE common stock: SE service revenue: SE interest expense: SE dividends: SE supplies expense: Asset

Ch. 4 Which of the following is not a common internal control activity (or procedure)? Establishment of clear lines of authority Having employees covered by a fidelity bond Requiring regular vacations for certain employees Customer service comment cards

Customer service comment cards

Ch. 1 Which term describes a distribution of the business's assets back to the owners of the business?

Dividends

Blake Company purchased two identical inventory items. The item purchased first cost $22.00, and the item purchased second cost $23.00. Blake sold one of the items for $40.00. Which of the following statements is true? Ending inventory will be lower if Blake uses the weighted average cost flow method than if the FIFO cost flow method was used. Cost of goods sold will be higher if Blake uses the FIFO cost flow method than if weighted average cost flow method was used. The dollar amount assigned to ending inventory will be the same no matter which cost flow method is used. Gross margin will be higher if Blake uses LIFO than it would be if FIFO were used.

Ending inventory will be lower if Blake uses the weighted average cost flow method than if the FIFO cost flow method was used.

Ch. 4 Which of the following is not one of the purposes of an internal control system? Safeguarding the company's assets The evaluation of performance The assessment of the degree of compliance with company policies and public laws Ensuring that the company is using the most effective marketing plan

Ensuring that the company is using the most effective marketing plan

Ch. 5 If prices are rising, which inventory cost flow method will produce the lowest amount of cost of goods sold? LIFO FIFO Weighted average LIFO, FIFO, and weighted average will all produce equal amounts.

FIFO

Ch. 2 The matching concept most significantly influences which financial statement? Balance sheet Income statement Statement of changes in stockholders' equity Statement of cash flows

Income statement

Ch. 3 Abbott Company purchased $7,900 of merchandise inventory on account. Abbott uses the perpetual inventory method. How does this transaction affect the financial statements? Decrease accounts payable and decrease purchases. Increase inventory and increase accounts payable. Increase cost of goods sold and increase accounts payable. Decrease accounts payable and decrease inventory.

Increase inventory and increase accounts payable.

Ch. 4 Policies and procedures designed to reduce the opportunities for fraud are often called: Internal controls. Asset source transactions. Accounting standards. Financial systems.

Internal control

Ch. 5 At a time of declining prices, which cost flow method will result in the highest ending inventory? Weighted average FIFO LIFO Either weighted average or FIFO

LIFO

Ch. 5 Which inventory costing method will produce an amount for cost of goods sold that is closest to current market value? Weighted average Specific identification LIFO FIFO

LIFO

Ch. 3 Which of the following would be considered as primarily a merchandising business? West Consulting Martin's Supermarket Sandridge and Associates Law Offices KPM Accounting and Tax Service

Martin's Supermarket

Ch. 2 What is the primary goal of the accrual basis of accounting? Report revenue when received. Match assets and liabilities in the proper period. Report expenses when cash disbursements are made. Match revenues and expenses in the proper period.

Match revenues and expenses in the proper period.

Ch.4 An audit is useful to financial statement users because it: Guarantees that the financial statements are accurate and correct. Guarantees that management has not been involved in misappropriation of assets. Provides reasonable assurance that the financial statements do not have material misstatements. Assures users that confidentiality is maintained.

Provides reasonable assurance that the financial statements do not have material misstatements.

Ch. 2 Which of the following correctly states the proper order of the accounting cycle? Record transactions, adjust accounts, close temporary accounts, prepare statements. Adjust accounts, record transactions, close temporary accounts, prepare statements. Record transactions, adjust accounts, prepare statements, close temporary accounts. Correct Adjust accounts, prepare statements, record transactions, close temporary accounts.

Record transactions, adjust accounts, prepare statements, close temporary accounts.

Ch. 2 Which of the following statements about accrual accounting is true ? Revenue is recorded only when cash is received. Expenses are recorded when they are incurred. Revenue is recorded in the period when it is earned. Revenue is recorded in the period when it is earned and expenses are recorded when they are incurred.

Revenue is recorded in the period when it is earned and expenses are recorded when they are incurred.

Ch. 4 Which internal control procedure addresses the idea that the likelihood of employee fraud or theft is reduced if collusion is required to accomplish it? Separation of duties Physical controls Fidelity bonding Use of prenumbered documents

Separation of duties

Ch. 5 Which one of the following is not an accurate description of the Allowance for Doubtful Accounts? The account is a contra asset account. The account is a liability. The amount of the Allowance for Doubtful Accounts decreases the net realizable value of a company's receivables. The account is increased when the company's' estimate of uncollectible accounts expense is recorded.

The account is a liability.

Ch. 5 Poole Company purchased two identical inventory items. One of the items, purchased in January, cost $22. The other, purchased in February, cost $25. One of the items was sold in March at a selling price of $50. Assuming that Poole uses a last-in, first-out cost flow, which of the following statements is correct? The balance in ending inventory would be $25.00. The amount of gross margin would be $25.00. The amount of ending inventory would be $23.50. The amount of cost of goods sold would be $22.00.

The amount of gross margin would be $25.00.

Ch. 3 The term "FOB Shipping Point" means: The buyer pays the shipping cost. The seller pays the shipping cost. The buyer records transportation cost as an expense. The seller records transportation-out cost.

The buyer pays the shipping cost.

Ch. 3 Middleton Company uses the perpetual inventory method. The company purchased an item of inventory for $105 and sold the item to a customer for $180. What effect will the sale have on the company's inventory account? The inventory account will decrease by $180. The inventory account will decrease by $105. The inventory account will decrease by $75. There is no effect on the inventory account.

The inventory account will decrease by $105.

Ch. 3 The term "FOB Destination" means: The seller pays the shipping cost. The seller records transportation-out expense. The buyer pays the shipping cost. The seller pays the shipping cost and records transportation-out expense.

The seller pays the shipping cost and records transportation-out expense.

Ch. 2 What happens when a company collects cash from accounts receivable? The asset accounts receivable increases. Stockholders' equity increases. Liabilities decrease. Total assets are not affected.

Total assets are not affected

Ch. 1 Karen White helped organize a charity fund to help cover the medical expenses of a friend of hers who was seriously injured in a bicycle accident. The fund was named Vicky Hill Recovery Fund (VHRF). Karen contributed $600 of her own money to the fund. The $600 was paid to WKUX, a local radio station that designed and played an advertising campaign to educate the public as to the need for help. The campaign resulted in the collection of $24,000 cash. VHRF paid $15,100 to Mercy Hospital to cover Vicky's outstanding hospital cost. The remaining $8,900 was contributed to the National Cyclist Fund. Identify the entities that were mentioned in the scenario and explain what happened to the cash accounts of each entity that you identify (increase/decrease) for each entity Vicky Hill Recovery Fund Karen White WKUX Public Mercy Hospital National Cyclist Fund

Vicky Hill Recovery Fund: Increase 24,600 Decrease 600 Decrease 15,100 Decrease 8,900 Karen White Decrease 600 WKUX Increase 600 Public Decrease 24,000 Mercy Hospital Increase 15,100 National Cyclist Fund Increase 8,900

Ch. 5 The practice of reporting the net realizable value of receivables in the financial statements is commonly called the: cash flow method of accounting for uncollectible accounts. allowance method of accounting for uncollectible accounts. direct write-off method of accounting for uncollectible accounts. accrual method of accounting for uncollectible accounts.

allowance method of accounting for uncollectible accounts.

Ch. 3 The Cost of Goods Sold account is classified as: a liability. an asset. a contra asset. an expense.

an expense.

Ch. 5 Hoover Company purchased two identical inventory items. The item purchased first cost $35.50. The item purchased second cost $39.50. Then Hoover sold one of the inventory items for $65. Based on this information, the amount of: ending inventory is $39.50 if Hoover uses the LIFO cost flow method. gross margin is $27.50 if Hoover uses the weighted average cost flow method. cost of goods sold is $39.50 if Hoover uses the FIFO cost flow method. cost of goods sold is $35.50 if Hoover uses the LIFO cost flow method.

gross margin is $27.50 if Hoover uses the weighted average cost flow method.

Ch. 5 The primary reason for a business to allow customers to purchase goods or services on account is to: increase sales. increase cash flow from financing. decrease cost of goods sold. decrease the marketability of the company's inventory.

increase sales.

Ch. 5 The amount of accounts receivable that is actually expected to be collected is known as the: allowance for doubtful accounts. uncollectible accounts expense. present value of accounts receivable. net realizable value.

net realizable value.

Ch. 4 The most favorable audit opinion that a company can receive is a(n): adverse opinion. unqualified opinion. disclaimer of opinion. qualified opinion.

unqualified opinion.